Homesteading is to protect equity, not physical ownership of property. The reason for homesteading is related to the forced sale of the primary residence and the equity disbursement to non-lienholder creditors (Sedgwick LLP, 2010). Homeowners have two pathways to Homesteading, with different protections. As with many rules and regulations, common understanding of the term has few ties to the application of the law in practice.
It can be questionable as to if homesteading is a real value to a homeowner in today’s financial world. Owning a home historically was a method to obtain wealth. Current trends resulting in the reduction of property value and increased indebtedness of homeowners has led to an increase in creditor actions against accrued value of the homeowner’s home. California law has established a procedure to protect homeowners from creditor seizure of property equity (Cheeseman, 2016).
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The legislature then enacted laws to provide automatic basic homesteading rules for any home purchase. Equity can only be transferred to the homeowner after the sale of the property when creditors force the sale. The basic law places all creditors before homeowner. The process of filing a specific homestead provides differentiation between the liens voluntarily put on the property, such as bail bonds, and liens placed for non-payment of taxes. Homeowners can be granted their equity before non-voluntary liens (Title Trust Deed Service Co.v.Pearson, 2005). Two paths to protection with varied results when applied create confusion with the concept of